thoughts about marketing sparked by events

06/21/2008

Deconstructing Risk

Malcolm McDonald, Emeritus Professor, Cranfield University School of Management wrote a little article called "Getting Marketing back into the Boardroom". At the heart of the article is the idea that marketers need to be able to deconstruct business risk into three components and then develop strategies that account for each of these risks.

1. Market risk: the risk that the market is not as good as you think it is

2. Share risk: the risk the strategy won't develop the share it promises

3. Profit risk: the risk the profit pool won't allow you to make the margins you promised.

I hadn't seen this before and really like it because the implications and actions arising from each are very different. My current employer actually faces a combination of all three. The mobile phone category is largely saturated so switching to a replacement market, the company is reworking it product porfolio to develop its share position, but the economics of the business and the cost of customising for individual markets make it very difficult to drive marginal profits from marginal markets.